Important examples of escalation are easy to find in political science, such as the buildup of American troops in Vietnam during the 1960s and the arms race of the 1960s, 1970s, and 1980s, to mention just two. Such escalatory behavior is driven at least in part by a desire to keep previous investments from having been wasted. In this chapter we consider a model of escalatory behavior introduced by the economist Martin Shubik and extensively analyzed by Barry O’Neill. This model is known as the dollar auction.
KeywordsTerminal Node High Bidder Game Tree Rational Play Observable Model
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